Stock choose of the week: Why analysts are bullish on Exide Industries

Though Exide’s boom inside the fourth quarter of 2018-19 changed into modest, it still surpassed Street expectancies. Analysts were expecting to decrease boom because of the continuing slowdown in automobile income. Exide’s revenue grew 6%, yr-on-yr (y-oy), within the fourth sector because of multiplied extent boom in all its important segments—car, sun, UPS and investors, and other commercial batteries. Reduced lead costs—down 20%, y-o-y—contributed to Exide’s higher running margins and helped its net profit develop eleven%, y-oy.
Analysts are becoming increasingly bullish in this counter now because the current crash in its share fee has brought its valuations to affordable degrees. Exide fell 29% whilst the ET Auto-Ancillaries Index fell 21% at some point of the same period. Exide’s percentage fee fell greater than the industry index because of its excessive dependence at the OEM phase in motors and -wheelers. Concerns approximately the NBFC credit score squeeze and its impact on vehicle income are by and largely accountable for the enterprise-extensive downturn. Auto income has additionally been impacted by using upward push in fees because of the implementation of BS VI norms.
While short-term hiccups are expected to retain, Exide’s long-time period growth tale is intact. First, the GST-led shift in market share from the unorganized to the organized region in the replacement market remains persevering with and this has to advantage Exide, that’s the market chief, the maximum.
Second, even though OEM sales have suffered, there may be no fall in demand for substitute battery. In fact, the call for is predicted to develop within the coming years because of robust primary income within the past 3-four years. Third, Exide can even benefit from emerging opportunities—expanded traction in solar and electric powered cars will augment call for batteries. For example, the variety of e-rickshaws plying the roads have markedly increased, and different segments—automobiles, buses, and so forth.—are expected to peer comparable growth.

Fourth, margin improvement is also predicted to preserve in the coming years because the worldwide financial outlook is weak and the chance of a rally in lead costs is far away.
More importantly, Exide is now taking a sequence of measures to bolster its market percentage within the automobile battery replacement section. These steps consist of expanded guide to sellers, improvement in after-sales provider, the faster turnaround in guarantee associated claims, and so on. Exide has also been upgrading its generation and is coming out with new launches. For instance, it expanded its marketplace percentage in light industrial vehicles and tractors by way of introducing a less expensive logo—Dynex.
We pick the inventory that has proven the maximum increase in ‘consensus analyst rating’ within the past one month. Consensus score is arrived at via averaging all analyst tips after attributing weights to each of them (five for sturdy purchase, four for purchase, three for hold, 2 for promoting and 1 for robust promote) and any improvement in consensus analyst rating suggests that the analysts are becoming extra bullish on the stock. To ensure that we select the simplest agencies with first-rate analyst insurance, this seek is limited to shares that are protected by means of as a minimum of 10 analysts. You can see similar consensus analyst score adjustments throughout the past week within the ETW 50 desk.

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